Insightful breakdown of founder ownership dynamics through different funding stages. This summary sheds light on common investor concerns and how actual data from Carta helps put things into perspective. Thanks to Denis Efremov, PhD for highlighting key takeaways — definitely a useful resource for both founders and investors.
Series B+ Investor in Tech Startups | Principal @ R136 Ventures | Forbes 30under30
✂️ Broken captable or new reality? Founders retain only 50% after Series A! As you know, venture capitalists have a practice of putting red flags on startups - on those who have things that are theoretically incompatible with the venture history of building a business. But the world is unfair - we already spoke about solo founders before. It is a typical red flag, but almost every VC has a solo founder in its portfolio. So, what are we talking about now? Often, VCs say - founders have too small equity ownership, we won't invest. Why did you give 5% to the team? Another 3% to advisors? Sold 30% at Seed? And so on. Exaggerated, but you've probably faced this. So, let's look at the great source of real data on this - Founder Ownership Report from Carta, which was recently released by Peter Walker. 1/ In the report, there's a graph showing the change in the average ownership structure by investment stages. The share remaining with founders and the team is as follows: 🔻 After Seed: 56.2% (founders) + 11.8% (team) = 58% 🔻 After Series A: 36.1% (founders) + 13.9% (team) = 50% 🔻 After Series B: 23% (founders) + 15.4% (team) = 38.4% 🔻 After Series C: 15.7% (founders) + 16.7% (team) = 32.4% 🔻 After Series D: 11.4% (founders) + 17.9% (team) = 29.3% 🔹 That is, it's statistically normal for the ownership percentage to drop below 50% after the second major series! So, you can confidently tell investors about this. Moreover, the option pool and employee shares grow over time - this is additional motivation. 2/ Of course, this isn't a direct paradigm shift. Carta shows that in the top percentile (speaking about "digital" startups): 🔻 After Seed: 74.6% 🔻 After Series A: 58.3% 🔻 After Series B: 42.6% 🔻 After Series C: 33.8% 🔻 After Series D: n/a 🔹 The situation is clearly better, but ownership also drops below 50% after Series B! 3/ What else is interesting: ▪️ 35% of startups have solo founders (17% of VC-backed). ▪️ About 20-25% of startups with two co-founders lose one of them within 4 years. ▪️ There is always one lead founder (55% if there are two co-founders, 47% if three, 42% if four, and 36% if five). ▪️ The option pool grows by 1-2% after each round. ▪️ The investors' share becomes >50% when the startup valuation reaches $50M-$100M. 👉 You can download the full report (20 pages) via the link: https://lnkd.in/dJ9Bc5GQ 👇 How does it correspond to your experience? Share in comments!
